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The Cruelty of the Minimum Wage

In his State of the Union speech Tuesday, President Obama called for an increase in the federal minimum wage, gloating that it had been endorsed even by his vanquished moderate Republican opponent in the 2012 campaign. A minimum wage increase is not needed, and would harm those it's supposed to help.

The minimum wage actually works as a maximum wage for millions of low skill, or no skill workers.

A few years ago, I ran into some financial difficulty. A sudden drop in income and a lifestyle I suddenly couldn't support forced me to take a part-time job. With the economy and job opportunities scarce, I ended up delivering pizza.

Food service workers are typically hired at low wages. Once new hires show their ability to learn and excel in their jobs, opportunities for increased pay and responsibility are supposed to follow. Because of the minimum wage, new hires already earn the amount the market will bear, resulting in static pay. It's a glass ceiling for wages at the bottom end, accentuating a culture of discouragement and apathy. People learn from that distorted experience that the only way to advance is to vote themselves an increase in pay. The minimum wage teaches exactly the wrong lessons.

Companies who hire at minimum wage often have a large workforce and low profit margins. Therefor, increasing wages, even slightly is a burden on the employer as it is multiplied by the shear size of their employee roster.

Maryland bartender Sarah Smith said raising the minimum wage just means fewer jobs. "In the service industry turnover is commonplace, exponentially more than any other industry." A higher minimum wage would stifle the mobility of service workers, making it difficult to find work -- forcing people to stay in jobs they don't want.

There is a culture among young, minimum wage employees of trying out jobs and establishments to find a place they like and people with whom they are comfortable. The same goes for the managers: they get to know the local labor pool, often being part of it, and want to be able to give someone new a chance. The higher the minimum wage, the more difficult it is to give someone new that chance.

Smith noted that proponents of increasing the minimum are using those in service industry jobs as an example of whom it will benefit. She doesn't think it will help at all. "Upward earning potential is based on performance, not how much you make when you are hired."

Keith Hennessey made what many see as the obvious and complete rebuttal to the President's call to raise the minimum to $9/hour, by asking, "Why not $90/hour?" Hennessey says any increase suffers from the same problems:

The same logic holds, just to a much lesser degree, for a minimum wage increase of any size, including the increase to $9 proposed tonight by the President. A minimum wage increase precludes employers from hiring, or from continuing to employ, those workers whose productive value to the firm is worth less than the new minimum wage. Like any price ceiling or price floor a minimum wage restricts supply, and an increase in the minimum wage restricts supply more. Raise the minimum wage and you will eliminate jobs for the lowest-skilled workers in America.

Yesterday, on TheBlaze there was a good discussion on minimum wage jobs, and how they provide on the job training. How the minimum wage is a cruel insult to young people, especially in poor neighborhoods without a lot of other opportunities.

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“I think it is inflationary,” said Rep. Paul Ryan (R-WI) to CNN. “I think it actually is counterproductive in many ways. You end up costing jobs from people who are at the bottom rung of the economic ladder.”

Most people working at the minimum are like I was, part-timers. All together, according the the Bureau of Labor Statistics only about 5% of people paid by the hour make the minimum or less.

Like many liberal policies, raising the minimum wage will only harm those it 'intends' to help. The minimum wage is a cruel idea whose time has past, and in fact, never was.

Raising the minimum wage adds to wage compression. Those who have already been hired see those newly hired at the new minimum wage making, in some cases, what they are making after having been working for some time. Also, I have observed, that whenever the minimum wage is raised, the price of every thing else is also raised. (especially groceries.)

This is a complicated issue and I do not know all the facts nor have a clear answer. However, I do not agree that most minimum wage earners are part-timers. In my area there are plenty of couples working full-time in minimum wage jobs and trying to raise a family in some cases. Also, there are many large companies that make plenty of profits yet do not pay their employees as well as they could. I recommend reading the book, "Nickel and Dimed" to get some insight into the challenges workers in low wage jobs face. It may be a 10 year old book but I truly believe that the experiences the author went through are still valid today; maybe even more so. Affordable housing is a huge issue for low wage earners. I wish everyone could get a quality education but that's a completely different topic.

I understand full well what it's like not to make a lot of money, Penny. And what companies pay people is between the companies and the people they pay. If we tell them they have to pay more, they will hire fewer people (or raise their own prices). There is no free lunch.

Liberal policies always sound good "in theory"... the result of this is the young and inexperienced will find fewer jobs; employers who would like to hire more will not be able to, forcing more duties onto their present employees, and the price of everything we consume will go up to compensate for the higher wages, putting these same minimum wage workers (really all consumers) right back where they were... paying much more for goods and getting much less for their money. What a vicious cycle.

And no mention of what will happen to all those union wages that are, by contract, some multiple of the minimum wage. They will all go up at the same time, thus costing their industries millions in additional wages even though their union members already make far in excess of the minimum wage.

Despite decades of economic analysis showing that it’s a bad idea, calls to increase the minimum wage continue to be heard from people who think you can mandate prosperity. In the latest, particularly egregious example, New York Governor Andrew Cuomo is proposing to raise the minimum wage in his state to $15 an hour, following the disastrous example of Seattle. The twist? He’s only applying the increase to fast food workers, leaving the minimum wage for other industries as is.

Since the first federal minimum wage went into effect in 1938, there have been people calling for an increase. Recently, there has been a push for a $15 hourly minimum wage at the federal level, as well as within various state and municipalities. Many of these calls for minimum wage hike have been led by, and funded by, unions. One in particular, Raise the Wage, called for a $15.25 minimum wage in Los Angeles and was funded by unions, including AFL-CIO.

President Barack Obama delivered his sixth State of the Union address to Congress last night, laying out a litany of mostly terrible policy proposals, as well as attempting to defend his economic record. There's no denying that he's a strong orator who tells a story very well, but the substance of the speech itself was more of the same stale ideas and poor leadership that Americans have seen throughout the course of his presidency. Though there are plenty of policy items worthy of analysis, here are some lines that stuck out.

“[T]here's a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market.”

Earlier this year, the Congressional Budget Office released an analysis on effects of raising the minimum wage to $10.10 per hour, a proposal supported by President Barack Obama and many Democrats on Capitol Hill. The nonpartisan fiscal research arm of Congress estimated that this artificial increase would result in as many as 1 million workers losing their jobs, a finding that was disputed by the White House and economists more interested in advocacy for a cause than the consequences of bad policy.

For the last two years, labor unions have a led a campaign known as "Fight for 15" to pressure the fast food and retail industries to raise the minimum hourly wage to $15. Big Labor has a particular interest in legislative efforts to raise the minimum wage, given that many union contracts are indexed to it. In a February 2013 research brief, the Center for Union Facts noted that collective bargaining agreements often "either set baseline wages as a percentage of the state or federal minimum wage, or mandate a flat wage premium above the minimum wage."

The minimum wage has been a major plank in the Democratic platform for years, with lawmakers continually pushing for increases, both at the state and federal level. Earlier this year, President Obama made a hard push for an increase in the federal minimum wage from it’s current level of $7.25 an hour to $10.10 an hour, backed by Harry Reid and a majority of Democrats in the Senate.

Still a student whose resume was a blank sheet of paper, I walked into work on my first day as an assistant leader at a children’s summer camp with no experience. I had no skills concerning supervising children or dealing with staff, and the first weeks were filled with my training by senior staff rather than me contributing to the program. I was hired as an investment in the hopes that at the end of training, I would be able to provide enough services that the camp would make a profit. With that investment, there was the risk that I would not be worth the minimum wage (which back then was around $7.25 an hour) I was being paid. Think about it – that is a high wage to pay a teenager who needs to be taught everything, starting with the fundamentals of showing up to work on time, especially when you are paying them to allow you to train them. If this is the case, should you be allowed to pay them less, at least until they can prove they can do their job? The government says no, through minimum wage legislation.

"According to a Gallup poll, economic problems dominate in the question of the most important problem facing the nation today. This makes the priorities championed by Democrats all the more puzzling. "

Economists are now reporting what we all know already - America's economic growth has ground to a halt. Wednesday's report from the Commerce Department was bleak. The expected growth in GDP was 1.1%, but the Commerce Department is now reporting a rate of growth of only 0.1%. This has been felt for a long time by average Americans. According to a Gallup poll, economic problems dominate in the question of the most important problem facing the nation today. This makes the priorities championed by Democrats all the more puzzling. As we struggle to sustain an economic recovery that has been charitably described as "choppy", Democrats continue to push an agenda that is out of touch and fails to solve the underlying problems.

As one of our over 6 million FreedomWorks members nationwide, I urge you to contact your senators and ask that they vote NO on any increase in the federal minimum wage. Sponsored by Senator Tom Harkin (D-IA), the latest Senate bill, S. 2223, would raise the minimum wage nationwide from $7.25 per hour to $10.10 per hour. Furthermore, it would provide for permanent automatic wage increases, indexed to inflation.